Pick Your Intermediaries Wisely

Do hotels need direct connections or electronic distribution? The term “direct connect” implies that the demand touch point will have a direct electronic connection into a hotel’s inventory and rates, either through the CRS or the PMS. However, given the volume and variety of demand touch points in today’s market, a strategy of exclusively direct connections is not only expensive, but also incredibly inefficient, maybe even unrealistic.

For growing brands like Fairmont (www.fairmont.com), Raffles (www.raffles.com) and Swissôtel (www.swissotel.com), intermediaries like tour operators and agencies help to sell rooms more affordably than going into a new market. Awareness advertising in a foreign country could cost a fortune. Languages and ways of doing business change when selling internationally, which again requires the help of proven intermediaries.

Hotels must be able to consistently merchandise and distribute their products through the widest community of channels, while at the same time retaining control and minimizing the impact on technology infrastructure and resources. Transactional intermediaries like Pegasus Solutions (www.pegs.com) offers the global buying audience access to a collection of 90,000 electronically bookable hotels. Working without a transactional intermediary means the expense for a book, modify and cancel that yields no revenue could cost $25 in labor. With an electronic distribution intermediary, the same scenario costs the hotel nothing.

Consumers are also more directly involved in the process of shopping and booking travel than ever before. In the next 20 years, the role of the intermediary will be even more crucial in facilitating the distribution process and adding value, especially as Google and MetaSearch engines continue to innovate how guests shop for and purchase travel. Data shows the volume of reservations from the Internet and GDS channels continuing to grow. And now, Google has added a new channel to the equation by adding average price and availability to search results in Google Maps.

Manage the Channel

Managing electronic channels effectively has never been so important. Rather than crying “direct connect” because American Airlines grabbed some headlines early this year, hotels should be relying on the intermediaries that add value, asking:

Does the intermediary actively facilitate multiple distribution business models supported through a variety of channel types?

Is the overall cost of operation lower with the intermediary in the picture than without?

Will the technology provide the right combination of speed, flexibility, and future-proofing built around industry standards?

It’s important to highlight the fact that this is not simply a question of technology. Some assume that in a highly connected world, a hotel need only deploy a few connections using XML then sit back and watch the transactions flow. In reality, the demands of Internet shopping can create millions of transactions; an experience that is sometimes compared to trying to drink from a fire hydrant. Those “easily deployed” XML connections start to look expensive and difficult to support when the system on the receiving end cannot cope with the workload.

For many hotels it is becoming obvious that they need strategic electronic distribution. The market will naturally move towards solutions that offer the most compelling combination of scope, flexibility and cost-effectiveness, eliminating those intermediaries that fail to add value in the supply chain. While that doesn’t translate into an environment of hotel direct connects, it does suggest hotels should pick their intermediaries wisely.